With shares of Nokia (NYSE:NOK) trading around $3.66, is NOK an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Nokia operates as a mobile communications company worldwide. It operates in three segments: Devices & Services, HERE, and Nokia Siemens Networks. Nokia designs and develops mobile products and services; provides digital map information and related location-based content and services for mobile navigation devices, automotive navigation systems, Internet-based mapping applications; and provides mobile and fixed network infrastructure, communications and networks service platforms, as well as professional services and business solutions, to operators and service providers. The mobile movement is very hot at the moment and if executed correctly, Nokia may be able to see significant profits. Should Nokia provide more relevant mobile products, look for it to become a major player in the space once again.
T = Technicals on the Stock Chart are Weak
Nokia stock has seen a consistent downtrend over the last several years. Any progress in the stock has been met with immediate selling pressure. Currently, the stock has exhibited a reasonable bounce and if it can break above its downtrend, it may see higher prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Nokia is trading around its key averages which signal neutral price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Nokia options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Nokia Options | 48.84% | 6% | 5% |
What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| June Options | Steep | Average |
| July Options | Steep | Average |
As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bearish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Decreasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Nokia’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Nokia look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 13.64% | -87.10% | -778.57% | -537.50% |
| Revenue Growth (Y-O-Y) | -23.40% | -20.68% | -23.13% | -29.56% |
| Earnings Reaction | -12.93% | -8.92% | -5.00% | 6.49% |
Nokia has seen decreasing earnings and revenue figures over the last four quarters. From these figures, the markets have not been too happy with Nokia’s recent earnings announcements.
P = Poor Relative Performance Versus Peers and Sector
How has Nokia stock done relative to its peers, Apple (NASDAQ:AAPL), Ericsson (NASDAQ:ERIC), Research in Motion (NASDAQ:BBRY), and sector?
| Nokia | Apple | Ericsson | Research in Motion | Sector | |
| Year-to-Date Return | -10.00% | -12.77% | 23.96% | 25.61% | 9.37% |
Nokia has been a relative underperformer, year-to-date.
Conclusion
Nokia provides mobile and mobile infrastructure products and services to a vast and expanding worldwide mobile industry. The stock has been in a consistent downtrend over the last few years but has recently seen a modest bounce. Earnings and revenue figures have been decreasing for the company over the last four quarters, so, investors have not been too happy. Relative to its peers and sector, Nokia has trailed significantly in year-to-date performance. WAIT AND SEE what Nokia does in coming quarters.
No comments:
Post a Comment